Shared Ownership: what you need to know

If you’re looking to get onto the property ladder, but can’t get the necessary funds together for a hefty deposit, a Shared Ownership scheme could be the perfect solution.

Initially aimed at giving lower to middle-income families a helping hand onto the housing market by offering them the chance to buy a stake in their home, today, many now see Shared Ownership as the easiest route onto the housing ladder. As Shared Ownership Week draws to a close we take a look at the scheme in more detail.

How it works

Shared Ownership is a scheme offered by a number of housing associations, whereby you purchase a share in a property – anything from 25% to 75% – then pay rent on the outstanding share. As the rent is subsidised, and the mortgage needed is smaller, it’s often far cheaper than buying a home outright. The majority of Shared Ownership schemes give the option for the applicant to own 100% of the home further down the line – this is commonly known as ‘staircasing’.

“Shared Ownership is helping people become homeowners at a lower initial cost, with 41,000 new homes delivered through Shared Ownership since 2010,” says a Department for Communities and Local Government spokesperson.

Who’s eligible?

Anybody who has a combined household income of £60,000 or less can qualify to buy a house through the scheme. Alongside this, prospective applicants need to be either a first time buyer, or a previous homeowner who cannot afford to buy a home presently.

Alternatively, you are also eligible if you are currently renting from a council or housing association.

The figures

Lets take a look at a real-life example of how much a Shared Ownership scheme could cost you, based on purchasing 25% of an average property in Liverpool.

The average price of a home in Liverpool comes in at £142,592 – if you were to purchase 25% of a property such as this through Shared Ownership, you would need a minimum deposit at 10% of £3,564. This would give you a mortgage of £32,083, with monthly payments of £193. Your monthly rental payment on the remaining 75% share would be £245 – giving you a total monthly cost (minus service charge) of £438.

If, after 12 months of owning 25% of your property, you wanted to take on a further 25%, bringing your total ownership up to 50% you could do, for an extra £84.86 per month. This would bring your total monthly cost up to around £522.86.

Angela Kerr, director of HomeOwners Alliance, spoke to us about the benefits, along with some potential pitfalls of Shared Ownership.

“Shared Ownership is a great way of getting on the property ladder for those who can’t afford to buy on the open market,” says Angela. “But we hear of a lot of common problems from homeowners once they move in.

“Shared Ownership schemes are provided by housing associations or private developers and the details, costs and restrictions involved vary by provider. So you must research each one on its individual merits and read the small print of your lease.

“For example, are there any restrictions when it comes to buying a greater percentage of the property? Are there any restrictions when it comes to renting the property out or renting out a room? Equally important is finding out as much as you can about maintenance charges, and asking how more significant costs e.g. repairs to the roof, will be paid for.”

David Robinson, marketing and communications officer at Riverside Home Ownership, says Shared Ownership bridges the gap between renting and buying and reaches out to prospective home owners who may be looking for a more affordable way of getting onto the property ladder.

“In the current climate, the idea of owning a property seems out of reach for many but Shared Ownership provides an alternative for first time buyers, in particular, who need a helping hand,” he says. “A smaller share in a property means a smaller deposit at the outset and this is what makes it stand out as an excellent affordable option. Shared owners can purchase a share which suits them, safe in the knowledge that if they want to increase their shares and own more of the property in the future, they’re able to do so!”

Pros

• Low deposit – the required deposit on Shared Ownership properties is as small as 5% • The ability to increase share level until you own home outright • Combining the mortgage and rent, your monthly output will still usually be less than just renting or covering a full mortgage • Get out when you want – you can sell your shares at any time • Combine Shared Ownership with joint ownership to make the undertaking even more financially sound

Interested in buying a property through Shared Ownership?

Here are some tips to help you.

• Don’t be too restrictive in your choice of area. While there are plenty of Shared Ownership developments in the city, if you are too specific about the area you want to live in you may be disappointed. Be willing to stretch the boundaries of your search area a little.

• Be prepared to join a waiting list. If you qualify for Shared Ownership you may need to wait a little while as some properties are reserved for essential workers such as police officers, teachers and MOD personnel.

• Keep that score up. If you have a low credit score you may find it more difficult to get accepted for Shared Ownership.